Four days after George Osborne delivered his budget to parliament, the political fallout from the one measure that he metaphorically kept up his sleeve and then inadequately explained as "a simplification" continues. The so-called "granny tax" has delivered for the chancellor headlines from his traditional supporters that no minister enjoys. "Osborne picks the pocket of pensioners," read the Daily Mail. It has also recruited a fresh army of articulate voices who have given a very clear response to the coalition's increasingly shaky mantra that "we are all in this together". No, we most definitely are not is the consensus of the older "squeezed middle".

The apparent unfairness in who pays the highest price in Osborne's goal to reduce the deficit by 2015 is threatening to turn fissures in society into potentially far more dangerous chasms. Increasingly, they divide old from young, men from women, the north from the south, public sector workers from their private sector equivalents, the supposedly deserving poor from their allegedly more feckless peers.

The grievances uttered across society are often justified. However, what also needs to be heard is a wider debate about the shape of the modern welfare state: one that reminds us of the function and value in social security; the importance of pooled resources available to all in education, health and infrastructure and the civic ties that bind: ironically the very threads of the now much-maligned idea that we all share the pain. Yet the political voices that ought to be articulating these arguments are shamefully silent. It's as if the establishment has grown ashamed of the welfare state.

David Willetts in his book, The Pinch, writes: "We know that each generation is going to move on… we know its chances of doing better… are greatest if it is standing on our shoulders." Standing on our shoulders, in this current climate, requires solidarity. Baby boomers, beneficiaries of a free university education and housing boom, the more affluent among pensioners should give up their personal tax allowance if it spares the young a further diminishing of their prospects. However, Willett's language of civic virtue, interdependency and mutualism needs to resonate much more strongly to wipe out the toxic aftermath of the bankers' excessive appetite for profit .

Their greed has torn the social fabric. A YouGov poll this month indicates that we believe the government spends too much on benefits; "scroungers" are an issue and the universalism that glues the welfare state – such as child benefit for all – needs modification. Recession always sees a reduction in empathy; greater prosperity improves it. Nonetheless, the demonisation of those on benefits, including the sick, the disabled and those unemployed because of structural changes to the economy, undermines us all. Gradually, every unemployed person transmutes into "the other"; the underclass, the dispossessed, victims of their own behaviour, not the catastrophic misjudgments of governments.

While the so called "underclass", living without what Adam Smith called "regard" , are easily damned, admiration is shown for the excesses of the "overclass", the stateless nomads, seeking the next tax-free domain, "earning in their sleep"; making money from money, contributing pitifully little to the public coffers. While few of us will ever meet the likes of Sir Philip Green, who spent £6m on his birthday bash, many of us will soon know men and women, trying hard, who have lost a job. Will that personal contact with those drawing for now on the welfare state help to revive social solidarity and draw some of the poison injected by political rhetoric?

When social cohesion is replaced with envy, mistrust and suspicion, we increasingly believe what we wish to believe rather than what the facts reveal. The sad truth of this budget is that it is the poorest who are proportionately paying by far the highest premium for the national albatross of the multibillion pound deficit. Once all the tax, credits and benefits alterations are churned in the budget mixer, the poor will be 63p better off a week; a couple with a joint income of £80,000 may benefit by over £8 a week while those on a salary of half a million pounds or more will have £357 extra in their pockets. Even given the Liberal-Democrats achievement in removing two million from paying income tax altogether, these figures – against a backdrop of the huge cuts still to come – do not add up to social justice.

The inequity in this "redistribution", in which 14,000 millionaires receive a tax cut of £40,000 a year, is what turns the argument in favour of keeping the 50p in the £1 tax for those earning more than £150,000 into a matter of social cohesion and civic good, not simply an issue of economics. It is the language of citizenship that George Osborne appears not to understand. He argued on Wednesday that the 50p tax had been ineffectual, raising "only" £1bn. The TUC, using independent analysts, says it was a far higher return. Osborne insists that reducing the tax to 45p, plus other tax avoidance measures, means the UK will receive "five times more money each and every year from the wealthiest in our society". According to the Tax Justice Network, almost £70bn was "lost" to the economy last year – over half the NHS budget – in the "shadow economy" through illegal tax avoidance. Osborne's "times five" prediction is one to which the country will surely hold him fast.

Lower taxes for those on £150,000 plus is justified on the grounds that reduction promotes greater entrepreneurial zeal. It makes no sense, then, to move 300,000 people into the higher 40p tax band. Will this not similarly impede their business zest and encourage teachers and technocrats, whom we desperately need, to contemplate flight to Montenegro? At the same time, the wealthy are expected to pay only 25% of their income to the inland revenue – possibly. So, are we really all in this together?

How we frame our response will influence the way in which society absorbs or breaks apart at the continuing impact of the cuts. Inevitably, in part because we are living longer, some may have to pay more out of their own pockets for care, for instance, and universalism will require sacrifice and adaption. But that should not be allowed to undermine the vital cohesiveness and ethos of the welfare state; and the importance of the public sector. The alternative is the accelerated privatisation of civic life and a two-tier society in which there is plenty for the minority who can pay – and shame, degradation, anger and exile from citizenship for the majority who can't.